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Background
James G. and Katherine Bourekis (petitioners) claimed a loss
on their 1981 Federal income tax return related to their
investment in PCS Ltd. Partnership (PCS or the partnership).
Following an examination of the partnership, respondent proposed
to disallow a substantial portion of petitioners' claimed loss.
As a consequence of these developments, petitioners (1) agreed to
extend the period of limitations for their 1981 tax year and (2)
agreed to be bound by the Court's redetermination of the PCS loss
issue in Kantor v. Commissioner, T.C. Memo. 1990-380, affd. in
part and revd. in part 998 F.2d 1514 (9th Cir. 1993).
In June 1996, petitioners received a letter from Revenue
Agent Janet Kenley, along with a copy of the opinion issued by
the Court of Appeals for the Ninth Circuit in Kantor, a Form 4549
(an examination report), and a Form 870 (a closing agreement).
In the letter, Revenue Agent Kenley advised petitioners that a
final decision had been entered in the Kantor case sustaining
respondent's determination disallowing the PCS loss. The Form
4549, which contained a computation of petitioners' 1981 tax
liability including the disallowance of petitioners' distributive
share of the PCS loss, indicated that petitioners are liable for
a deficiency in tax in the amount of $4,472, as well as statutory
interest on the deficiency computed through June 30, 1996, in the
amount of $15,174. Revenue Agent Kenley's letter, which also
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Last modified: May 25, 2011